CASE STUDIES IN BUSINESS ETHICS
Rabbi Jay Kelman CA The Strike Price

Recently, we in Toronto awoke to news that due to an (illegal) wildcat strike there was to be no public transit. May other transit providers drastically raise prices or is such behaviour nothing more than price gouging of innocents who have limited options?

The Torah prohibits one from knowingly pricing an object above its market price ( ona'ah ). While any amount of overcharge is prohibited no recourse is given if the discrepancy is less than one-sixth of the price. However if the overcharge (or undercharge) exceeds one-sixth the aggrieved party can nullify the transaction. In the modern day economy with so many variables such as service, convenience, location, hours of operation, influencing price, it becomes exceedingly difficult to determine an accurate market price. Nonetheless there are cases when it is clear one is being taken advantage of and recourse is granted. The taxi driver who takes the unsuspecting tourist the longer and more costly way would clearly be in violation of these laws. It would thus appear that taking advantage of those inconvenienced by the transit strike would violate Jewish law.

However one might argue that the sharp, sudden price increases are no more than a shift in the true market price. With the demand for services remaining relatively constant coupled with a huge drop in the supply of transportation, prices must by necessity increase to keep the supply demand line in place. Our economic fortunes are often determined by items beyond our control - such is the nature of the marketplace. Helping those who have suffered due to such circumstances is not the role of the marketplace but is the responsibility of our social service network as detailed in the laws of Tzedakah .

The supremacy of market forces is buttressed by the Talmudic ruling that the sale of war materials during battle are not subject to the laws of Ona'ah . In such a desperate situation the combatants are willing to pay whatever price is charged, and it is that inflated price that is the new market price representing fair value. Thus with the TTC out of service the "excessive" prices charged for alternate transportation represent no more than an accurate reflection of the market.

Nonetheless it is not clear that Jewish law would allow one to raise prices to take advantage of such a captive market. The Talmud seems to offer a contradictory ruling regarding an escaping fugitive who is charged well above market price for transport, allowing him to recover the excess fees. Taking economic advantage, even of a criminal, is unethical despite the obvious willingness to pay any price for a ticket. It is the objective value of the trip not the subjective desire of the criminal which is determinative.

Many authorities assume the fugitive case is normative and reject the battlefield case as representing a minority view. Others claim that no contradiction actually exists; in the war case all those in the battlefield will pay a premium for supplies, thus the price charged is "fair". However in the case of the escaping criminal the market price remains the same; only the criminal due to his unique circumstances would pay the higher (and unethical) price. Whether charging the travelling public more is analogous to charging a criminal a higher price or represents a changed market paradigm is open to debate. In any event even if taking advantage of unexpected market forces may be technically allowed it falls short of an ethical ideal and should be discouraged. In addition government agencies have the right to "ignore" such laws if they feel the public interest is best served by government intervention.